The SPIVA Scorecard: Hard Data on Active Management
The S&P Indices Versus Active (SPIVA) Canada Scorecard provides the most comprehensive data on active manager performance. The 2025 mid-year report shows that over the trailing 15 years, 92% of Canadian equity fund managers underperformed the S&P/TSX Composite Index after fees. For US equity mandates managed from Canada, the underperformance rate exceeds 95%.
This is not a temporary phenomenon or cherry-picked time period. Every SPIVA report since inception has shown similar results across virtually all geographies and time periods. The consistency of active management underperformance is one of the most robust findings in financial economics.
Why Most Active Managers Underperform
Active management underperformance is not primarily about skill — it is about arithmetic. As Nobel laureate William Sharpe demonstrated, the average actively managed dollar must underperform the average passively managed dollar by exactly the cost difference. Since active management costs 1.5-2.0% more annually than passive indexing, active managers as a group must underperform by that amount.
Individual managers can and do outperform, but identifying them in advance is extremely difficult. Past performance does not predict future results — top-quartile managers in one period are no more likely to remain top-quartile than random chance would suggest. The persistence of outperformance is statistically indistinguishable from luck in most studies.
When Active Management May Add Value
Despite the evidence favouring passive investing for most situations, there are specific contexts where active management can be justified:
- Tax-loss harvesting: Active managers can realize losses strategically to offset gains — particularly valuable in non-registered accounts for high-income professionals
- Illiquid/alternative markets: Private equity, private credit, and real estate where indexing is not possible
- Concentrated risk management: Professionals with large single-stock positions (e.g., tech executives) need active management to diversify without triggering excessive capital gains
- ESG/values alignment: Customized exclusions or tilts that standard indices do not accommodate
The Optimal Approach for High-Net-Worth Canadians
For most professionals with $500,000 to $5,000,000 in investable assets, the evidence-based approach combines:
- Core passive allocation (80-90%): Low-cost asset allocation ETFs or individual index ETFs for broad market exposure
- Tactical satellite positions (10-20%): Selective active strategies in areas where indexing is less efficient (small-cap value, emerging markets, alternatives)
- Tax management overlay: Active tax-loss harvesting and asset location optimization across accounts
This approach captures 95%+ of market returns at minimal cost while allowing for customization where it adds genuine value. It is the foundation of how we construct portfolios at SG Wealth Management — combining the efficiency of passive investing with the personalization that high-net-worth clients require.